NOTE: A new section has been added to the Whittler: Voyager RNS Log where I take a weekly or thereabouts, review of any RNS stories that are relevant to shares that I either hold or are of close interest: see page in the header menu.
We are now halfway through the 3 year reactive/passive portfolio exercise: for the rules and structure then it’s worth referring back to the previous quarterly reports on performance: use the categories link on the right hand side of the page; passive/reactive folio.
Just as a very brief refresher; the original 10 stocks of the Tinker and ASH (annual sit on hands) were reviewed and rebalanced in late January 2017 and had and had 8 of the original 10 stocks replaced. Following the rules, the 3YL (leave it alone and don’t do anything for 3 years apart from reinvesting dividends) was left intact with no rebalancing taking place. So the 10 stock portfolios have between them contained a total of 18 stocks selected from those stocks that formed my universe from which I normally consider purchases. That universe is considerably under 3% of the 2000+ combined fully listed & AIM stocks available for consideration. All all of the 18 stocks mentioned here are either still currently within my portfolio or have been at some time since the exercise began. The portfolio exercise described here started on the 22nd January 2016 with £100,000 invested in equal blocks of £10,000 between ADT, AMO, BOY, CCT, DTY, ELM, HIK, NFC, PSN & SOM. The January 2017 rebalancing/reappraisal of the Tinker & ASH introduced AIR, BVXP, D4t4, GFRD, ITV, TEF, SMWH & ZYT: all stocks that I had been holding for some time in my various accounts and all selected by my usual universe criteria on the basis of FCF, ROCE & CROCI.
As mentioned previously in this series I am a great believer in the security of investing in a basket of stocks, in fact, I recently published an article on the subject of a basket of stocks “Guess I Am A Basket Case”.
So, how are the various approaches performing at this stage as measured against each other and the fairly soft benchmark* of the FTSE All Share Total Return. The table below gives the performance data “warts and all” :-
* Note: I am shortly publishing an article on what I consider to be the very important subject of benchmarking your portfolio’s performance.
At the 18 month, 6th quarter stage, it’s quite amazing to see that there is nothing really significant in the performance of the three portfolios and they have all performed very well within fairly kind, although at some times choppy, overall market conditions. I suppose a couple of the reasons why the performances are so close are:
1. If you select quality companies that are already making decent profits, producing good cash flow and making a decent return on capital(ROCE, CROCI both over periods of time), then in my opinion you generally enhance your chances of success.
2. I am possibly not the best type of character to run the Tinker as I don’t listen to market noise or really make knee jerk decisions. In fact, I have only made a handful of reallocations (trades) within the Tinker in the 18 months it has been running; I simply tend to be a fairly laid back/patient investor.
What I would say is that in my actual portfolio rather than the 3YL, HIK would no longer be in the portfolio as it would have been sold or at the very least a serious evaluation of whether to keep, sell or reduce taken when the trailing stop loss, at the time in profit, was breached. HIK would certainly have been jettisoned on the profits warning of 3rd August 2016. Selling on the day of that relatively average profits warning would have still retained a profit on the original purchase of 15% rather than the loss of -28% that detracts from the performance of the 3YL. Incidentally a couple of years back I did a blog article on my actions with profit warnings and since that time Stockopedia have also produced an excellent article on profit warnings; worth a read.
In summary I am happy with the performance of the stocks discussed in this series and indeed many of them form the top 10 or 20 holdings from my current portfolio holding of about 30 stocks.
Just by way of a slightly different tack to this quarter's update, at some time I will include within the Stockwhittler site either an article or more probably a section on my investment disciplines that I apply to myself. Until I get that from draft to finished, although I guess such a thing will never really be finished, a couple of tasters but remember this is not advice but rather me sharing my approach to investing:
1) Use a trailing stop loss at all times. Now, by that, I don't mean an automated stop loss set on the broker's software that automatically sells when you bridge say a 12% trailing stop loss. No, what I mean is a real "wake up moment" where you totally and UNEMOTIONALLY evaluate that holding: ask yourself based on the current information at hand, would you a) genuinely buy that stock today if you did not already hold a position i.e. make a totally new addition to the portfolio & b) just for a moment, forget about what apparent attractions the stock may have and seriously and I do mean seriously, evaluate the potential of any further downside within that investment. c) if after a & b you are not totally UNEMOTIONALLY convinced, then simply sell; you will probably feel better for it, after all, you can always reinvest but with an uncluttered mind and so remember so importantly, I have preserved capital.
2) Almost invariably sell as soon after the market opening as possible on a profits warning. A PW almost certainly means several months of gradual decline in the share price until the management actions kick in and Mr Market begrudgingly starts to forgive the business. Again, it’s about preserving your capital.
3) Whatever investment software you may possibly decide to use DO take the time to become so totally familiar with what the system has to offer. Just that simple learning process will in my experience be a very worthy investment of your time.
4) Do not listen to market noise and in there I include the stuff that is churned out daily by journalists, brokers or the media in general: simply stay unemotionally focused.
Well, that’s it for this quarter’s update. The markets have been in our favour and sensible investing has paid a handsome financial return. However, who knows firstly what the general market conditions will be in the next 12 months? Indeed, in my usual sober way, remember that no matter what basket of great stocks you hold, the next profits warning could be just around the corner: all part of the varied tapestry of investing!
As ever, Happy Investing
Welcome to my Blog Page - I hope you find my whittling on to be of some interest. I am a private investor who is happy to share thoughts on the market and individual stocks. Please remember that I am definitely not offering tips or investment advice.